Interview: Lehman Brothers
morgan stanley says former president stephen newhouse has left the firm 6789 -- he turned down a new position reporting to purcell. the removal of newhouse, a 26-year veteran of the firm, prompted eight of morgan’s old guard to renew calls for purcell’s ouster. checking shares of morgan stanley at the close today, down 38 cents, $56.87. march job gains were the lowest in eight months as manufacturing prices headed higher. will u.s. corporations become more cautious about hiring and spending in months ahead? drew matus is senior economist at lehman brothers and joins us from new york with insight and analysis. welcome, drew. an awful lot of numbers today and as you pointed out, numbers we didn’t even expect. when you put them all together, what’s the picture that emerges of the economy?
>> i think the picture is one of caution with firms being very cautious about hiring given probably higher oil prices, higher input costs more generally. the other point of concern would be inflation. beat saw a pickup in average hourly earnings despite the fact that we got lower job growth than we expected and usually those don’t move opposite of each other. usually with higher job growth, you have higher earnings.
>> speaking of opposite directions, the i.s.m. survey on manufacturing showed a big jump in prices paid. the i.s.m. survey on service industries showed a drop in prices paid. is there an inflation concern out there or is it a mixed picture?
>> you have to remember, manufacturing companies use energy more aggressively than service sector firms do so if you’re manufacturing something right now and you’re buying oil in order to do it, you’re facing higher costs whereas a company like ours, for example, paper and pension, i guess. so there’s different cost structures for both sides of the economy and the manufacturing side is likely to be the one to be hit hardest by energy prices.
>> how much will feed through into the regular economy? manufacturing is smaller than service industries?
>> manufacturing is a lot smaller. we’ve seen that manufacturing companies have very little in the way of pricing power. we’ve had producer prices rising sharply for an extended period of time and we haven’t seen that pick up in consumer prices. the missing link is the feed-through effect from higher energy prices into the core c.p.i. because that’s when the fed will be concerned.
>> the fed was watching for many months the progress of employment. it seemed pleased with the fact that it picked up in recent month, then we get a number like today. how do you think they read that? how do you read it, and is there an explanation for the low number?
>> the explanation would be that we didn’t do a very good job forecasting. the 110,000 was half of what the market consensus was expecting on wall street. so once again, we somehow missed a dip. now, the question is, is this a one-time dip or a new trend? my guess would be that we’re somewhere in between. i don’t think we’re going to get job growth in the 100,000 range for the next couple of months. i think something higher than that is likely, even with higher oil prices so i don’t think the fed will be overly concerned about one number, i think they’ll look at the overall economy which seems to be doing just fine.
>> a number that didn’t get a lot of attention today, the final march number for michigan consumer sentiment, it dipped a little bit. will we continue to see a drop in consumer sentiment that threatens spending perhaps because of oil prices?
>> you might see a continued drop in consumer sentiment about linking it to spending is difficult. if you think back in your own life, you tend to spend more when you get more depressed to feel better. so the linkage between people being more confident and more willing to spend is shaky, at best.
>> how about in terms of job growth? we’re seeing job growth slow, at least this month. do you expect that to send the sentiment indicators down?
>> it’s not going to help things. the conference board indicator is likely to be the one that bears the bigger brunt of that. it’s the one that’s more tightly linked to the labor market . interestingly, inside the employment report, there’s the household survey, too, which is where we get the unemployment rate and that dropped .2% this month and the household survey tells us that we added 357,000 jobs. something weird is going on there with a discrepancy. maybe what will resolve it is seeing how the consumer confidence numbers actually move.
>> 30 seconds left. does the fed retained “measured” for an indefinite period, now? >> i think they keep it for the next two meetings.
>> thank you very much, drew matus, senior economist at lehman brothers. when we return, how does the weak jobs data fit into the long-term view. tom keene will have the “chart of the day” next.
在线播报
Listen Market briefing --- Mike (fast)
Economic reports --- Deirdre (slow)
NYSE --- Deb (fast)
Employment data --- Su (fast)
here’s how crude finished friday’s session, up $1.87, $57.27. unleaded gas also heading to a record today. looking ahead into next week, of the 45 traders and analysts surveyed by bloomberg, almost 60% say they believe the price of oil will fall next week, almost 30% say oil will rise, the rest expect little change. also friday, there were plenty of economic numbers for the markets to digest starting with a march jobs report that shocked economists and investors. employers adding just 110 workers in march, barely half the number forecast. unemployment fell .2% to 5.2%. su keenan will have details and we’ll hear from lehman brothers senior economist, drew matus, on the march report. we’ll also have details on an april’s fool day surprise, the wrong data was released for the prices paid. bob bowden coming up with that, plus, the bond market and fed reaction. here’s how the dollar reacted to today’s news. it finished higher against the yen, euro and the british pound. here are the settling numbers, now. the markets have closed. the dow jones industrials down 99 pints, 10,404 -- economic reports did give investors whiplash. deirdre bolton has the story.
>> stocks jumped at the opening bell as the weak unemployment report eased investor concerns about the threat of thraetion and higher interest rates. stocks fell after the market took a one-2 punch. an increase in the prices paid index of the i.s.m. report and oil prices rising to another record. 22 of the 24 groups that make make up the s&p 500 retreated.
>> that’s the risk out there, that inflation may be somewhat stronger and the concern is that the fed will have to move more abruptly and longer than maybe previously expected.
>> the oil rally also pressured wall street.
>> oil doesn’t seem to slow down. it’s stuck in the mid 50’s but creeping higher and stocks reflect that.
>> harley-davidson, carmaker ford and car parts maker dana all declined. delphi sank to an all-time low. the “detroit news” says the f.b.i. is investigating the company’s accounting practices. best buy shares plunged 8% after the company forecast the slowest quarterly sales growth in almost seven years. there are hopes that first-quarter earnings season will give stocks a lift.
>> between the economy, pricing power and prior expectations of the market having been scaled down, we may be set up for an upside surprise on earnings season here.
>> thomson financial says s&p 500 companies first-quarter earnings growth will be 8.1%, higher than the average for the first quarter of 7.6%. mike, back to you.
>> deirdre bolton. for more on today’s trading action, here’s a report from deborah kostroun at the big board.
>> a lot of news and economic reports coming out on friday’s session impacting the market with all the major averages lower. we did see record oil prices. crude oil closing up $1.87 a barrel. the i.s.m. manufacturing number fueled concerns about higher prices and inflation and the labor department report showed employers added 110,000 workers to payrolls in march, generally half of what economists expected. looking at the record crude oil price and its impact on energy stocks―integrated oil performing quite well. natural gas also performing well. look at a.i.g. year to date. this stock is down 22%. it’s the second worst performer this year in the dow jones industrial average.% general motors, the worst performer in the dow, down 26%. a.i.g. down 22%. a.i.g. at its lowest level in two years, the worst performer in the dow on friday’s session on concern that investigators may find more accounting problems. the company this week admitted it may have overstated net worth as much as $1.7 billion. retail and best buy on the downward slide, as well, in today’s session. best buy, the second biggest decliner in the s&p 500. they expect their fiscal 2006 earnings to be below analysts’ estimates. some other news in today’s session, car and truck sales. general motors posted its first monthly increase in u.s. sales of cars around trucks in march. toyota and nissan sales surged. however, ford said sales dropped 1.7%. freddie mac falling for a second day. john snow calling on congress to limit growth in the $1.5 trillion combined mortgage portfolios that both fannie mae and freddie mac have in order to cut risk in the financial market . i’m deborah kostroun at the new york stock exchange, bloomberg news.
>> the nasdaq started the second quarter where it ended the first, with a lower close. robert gray has details from the nasdaq marketsite in times square.
>> the nasdaq composite finishing the first day of the quarter with a familiar story, closing lower, near the lows of the session. as the selloff was about to finish for the day, david riggs with federated investors telling me we’re seeing slower economic growth and higher inflation, neither one of those is good for stocks and he is moving to the sidelines. he says the next big move for stocks is probably down, not up. the worst performing groups in the session, biotechs, the worst performers in the quarter and the worst performer in today’s session. also telecom stocks were lower and of course transports were lower as crude oil on the nymex spiking up to another record high today. airline stocks are weaker, facing higher fuel costs. jetblue, skywest and northwest airlines declining. retail stocks, merrill lynch recommending that investors underweight retail groups. some of the reasons for that include higher oil prices and difficult comparis comparisons to last year. some of the stocks falling, american eagle outfitters, urban out50ers among those declining. shares of m.c.i. rising, the number two long-distance phone company agreeing to reopen talks with qwest. qwest sweetened its takeover bid to $9.1 billion. m.c.i. did get a waiver from verizon to hold talks with qwest and verizon could force m.c.i. to ask shareholders to vote on verizon’s buyout bid. at the nasdaq, i’m robert gray.
>> more details on the latest jobs report showing american companies hired new workers at roughly half the forecast rate. economists say rising raw material costs are starting to hurt job growth. bloomberg’s su keenan has more on the story. su?
>> mike, the latest employment data suggesting u.s. companies are more cautious about spending and hiring at a time when we’re seeing gas and oil prices hit never-before-seen levels. 110,000 jobs added in march represents the smallest job growth since last july when talk of the so-called jobless recovery was a key issue in the presidential election. the march payroll additions are barely half what economists forecast. they came in below even the lowest estimate in a bloomberg survey. economist lakshman achuthan is unfazed.
>> april fool’s. month-to-month gyrations aside, we clearly have an economy that is humming along and it fine. you still have this persistent disconnect between what’s going on with the economy and g.d.p. and what’s going on with jobs. every month we see it in the numbers, weakness in manufacturing.
>> let’s look at the weakness in manufacturing. factory payrolls fell by 8,000, the reverse of what wall street economists predicted, a gain of that amount. former federal reserve governor susan phillips calls the greater-than-expected drop in the unemployment rate, 5.2%, the silver lining of the report.
>> any one month, you can get huge volatility from month to month. so i think we have to take that into consideration. but the unemployment drop was very encouraging.
>> j.p. morgan’s bruce kasman says last month’s hiring was weak and he sees it as a message the economy is losing momentum.
>> i think some of the risks that they might have to go more aggressively was reduced but there is still price pressure in the system and the fed’s policy stance needs to be adjusted. steady as you go here, 25 a meeting, but don’t underestimate where the fed has to ultimately go.
>> back to you.
>> su keenan. stay with us, we’ll have more in a moment.
